Of Overly-Lobbied HPV Vaccines: Unintended Consequences Department

I’ll say no more. Just go read it. It is but one perspective, on the issue — but an important one.

Should The Merial-Intervet Call Option Be Exercised, Untouched. . . .

. . .Sanofi’s CEO admits to the WSJ Health blog that:

. . . .The problem: Schering-Plough is bringing its own leading animal-health business to the Merck deal, and combining the two would create a juggernaut, with more than a quarter of the world market. . . .

While Sanofi’s CEO now says it is “more likely than not” that he will exercise the call, it is far from clear that the ECC and FTC will allow one animal health company — as a creation solely of merger and venture transactions (i.e., not natural, organic growth, over time) — to effectively seize control of a quarter of the world’s veterinary markets.

Peter Loftus Is Usually A Pretty Solid Reporter, But Today? He’s A Simple Stenographer/Toady

The occasion? CEO Fred Hassan’s glowing memoirs-to-himself (for only he — and perhaps Hans Becherer — could swallow such a load of self-serving puffery). The venue? Tonight’s Wall Street Journal. The stenographer? Peter Loftus, thus:

. . . .Merck knew Schering well because the companies co-market cholesterol drugs. The venture has come under pressure because of clinical studies raising questions about the drugs’ safety and efficacy, but Hassan doesn’t regard his handling of the matter as a major blemish. . . .

Really? Mr. Hassan’s word is considered definitive, on the matter? Doesn’t that seem just a tad self-interested, as statements to the press go? I mean he is only facing about 150 state and federal lawsuits that swear, and document, the opposite. I guess you were out of column space, for that sort of factual material, huh?

Hassan says he is handing over Schering-Plough “in great shape“. In fact, EPS is down 17 percent this quarter, and that “non-major-blemish” — Vytorin and Zetia — is off ANOTHER 18 percent in the U.S., this quarter — despite Mr. Hassan’s earlier assurances that the franchise was “generally stabilizing“. He said it at least twice, in public securities gatherings.

Mr. Loftus takes some pain to note that CEO Hassan “engineered” a turnaround at Pharmacia, and sold it to Pfizer — in much the same way that he is presently selling Schering-Plough to Merck (despite the “reverse merger” smoke and mirrors).

As just one momentary fact-check would have revealed, Mr. Hassan neglects to mention, in his telling of the Pharmacia turnaround fiction, and Mr. Loftus apparently neglected to ask after, Hassan’s role in the largest criminal fine ever paid — for off-label messaging (related to conduct while he was running Pharmacia, but for which Pfizer ultimately had to pay his tab) — to the tune of a cool $1.2 billion.

There is much, much more — but that is enough — to suggest that Mr. Loftus didn’t do any service to his readers, tonight. Next time you’re going to write fictional memoirs, while a $47 billion deal is still pending, Mr. Loftus — think about asking some actual questions, hmmmkay? [Don't even get me started on the ten-fold understatement of his golden parachute (see above right), that passes without so much as a nod, from Mr. Loftus.]

Namaste

PegIntron® Additional Indication Delayed By FDA’s “Complete Response Letter”, Today

Apparently, in an echo of the split (6-4) ODAC vote, on October 5, 2009 we earlier reported — the FDA has declined to immediately approve this new indication for Merck/Schering-Plough’s PegIntron^®. Instead, FDA staff sent Schering-Plough a complete response letter — essentially, a “regulatory punch-list” of open items, before approval may be granted. Per Reuters‘ reporting:

. . . .The company is seeking FDA permission to sell the injectable drug for melanoma. But the agency declined to approve the new use, at least right now, instead issuing a complete response letter about remaining issues.

“Schering-Plough will work closely with FDA to respond to outstanding concerns related to the PegIntron melanoma filing,” the company said in a statement.

Schering did not say what the FDA’s concerns were and company spokeswoman Mary-Francis Faraji said the drugmaker had no additional comment. . . .

Ouch.

Reading Public Document Tea Leaves — When Will The Deal Close?

No one knows. But this sort of “using employee investment black-out periods“, as a proxy for guessing the deal’s likely closing — came up almost exactly one month ago, over in Kenilworth. Tonight, it’s the Whitehouse Station version of the guessing game.

In any event, despite its vagaries and limitations — it is interesting, that Merck said, in an SEC “free writing” prospectus — filed on the evening of October 28, 2009 — that it expected the New Merck SIP shares to be SEC-registered by January 31, 2010:

. . . .The [Merck] SIP will be suspended effective upon the closing of the merger until New Merck registers with the Securities and Exchange Commission (SEC) the shares of New Merck common stock that may be issued to plan participants. Because of SEC requirements, New Merck will not be able to register its shares for approximately one to two months after closing. We currently anticipate registering the New Merck shares no later than January 31, 2010. . . .

That could mean that Merck expects closing will be around December 1, 2009. Or it could mean nothing – as it could simply be a Whitehouse Station-generated guess. I will say that the longer Merck keeps employees out of the SIP, the more reason to be annoyed they’ll have.

Truly, the employees need not be “locked out“, until the “Old” Merck shares are no longer trading. And that won’t happen until the reverse merger’s closing day. So, Merck could very well limit the SIP participants’ “pain“, by not starting the blackout until the merger closes. Merck has opted to start early, apparently betting this will lead to a one month after close (rather than two) period of lock-out — and that New Merck will be able to reopen the “New” SIP by January’s end.

It is clear that the process need not be started, until the merger is completed. As ever, we shall see — but if the reverse merger’s closing is delayed into 2010, the New Merck employees could be locked out for as much as four or five months. And that would be sub-optimal.

While We Wait For Mexico and China, Q3 2009 U.S. Vytorin/Zetia Sales Are Down 18%

That we learn from page 27 of tonight’s SEC-filed Form 10-Q — we also see a newly-amplified risk factor – on reimbursement of branded pharmaceuticals in the United States, at page 47, thus:

. . . .Market forces continue to evolve and can impact Schering-Plough’s ability to sell products or the price Schering-Plough can charge for products.

A number of intermediaries are involved between drug manufacturers, such as Schering-Plough, and patients who use the drugs. These intermediaries impact the patient’s ability, and their prescribers’ ability, to choose and pay for a particular drug, which may adversely affect sales of a particular Schering-Plough drug. These intermediaries include health care providers, such as hospitals and clinics; payors and their representatives, such as employers, insurers, managed care organizations and governments; and others in the supply chain, such as pharmacists and wholesalers. Examples include: payors that require a patient to first fail on one or more generic, or less expensive branded drugs, before reimbursing for a more effective, branded product that is more expensive; payors that are increasing patient co-payment amounts; hospitals that stock and administer only a generic product to in-patients; managed care organizations that may penalize doctors who prescribe outside approved formularies which may not include branded products when a generic is available; and pharmacists who receive larger revenues when they dispense a generic drug over a branded drug. Further, the intermediaries are not required to routinely provide transparent data to patients comparing the effectiveness of generic and branded products or to disclose their own economic benefits that are tied to steering patients toward, or requiring patients to use, generic products rather than branded products. Reports on comparative effectiveness of alternative treatments, prepared as a result of the additional $1.1 billion in federal financing under the American Recovery and Reinvestment Act (ARRA) of 2009, could begin to appear for therapeutic categories in which Schering-Plough has significant medications and could alter intermediary and patient perceptions of the value of leading Schering-Plough products, affecting health plan coverage and reimbursment and overall market share for these products. In the U.S., possible enactment of health care reform could result in a significant restructuring of intermediaries between manufacturers and patients and their economic incentives, resulting in adverse effects on Schering-Plough’s results of operations, cash flows and financial condition. . . .

FTC Legal Analysis Spells Trouble for Next Step: Intervet to New Merial

While it is likely that the reverse merger will close in a few weeks (or perhaps, days’) time, now, the 100 day call option in favor of Sanofi looks to face some tough sledding at the FTC. Recall that Merck gave Sanofi-Aventis a call option on all the Old Schering Intervet businesses.

Look at what appears in the US FTC Analysis Memo (PDF file), clearing the Merck-Schering deal, this evening:

. . . .In addition to these commonly used vaccines, there are a number of other vaccines that are used in poultry operations to a lesser degree that would be affected by the proposed transaction. These include vaccines for infectious bursal disease, reovirus, infectious laryngotracheitis, coccidiosis, fowl pox, avian encephalomyelitis, and infectious tenosynovitis.

Even though they are not used as universally as the core vaccines, these more minor vaccines play an important role in many poultry operations, as an outbreak of the disease can have equally disastrous economic consequences for poultry producers. Because of the unique characteristics of live and killed versions of poultry vaccines, they are not considered substitutes for each other.

The anticompetitive implications of eliminating one of the two leading suppliers of poultry vaccines in the United States are significant. Poultry producers have benefitted from direct competition between Merial and Schering-Plough, which has resulted in, among other things, steeper discounts and lower prices for customers. The remaining three market participants are smaller than either Merial or Schering-Plough, and do not have the capacity that either of these firms currently enjoys. As a result, these other firms would not be able to replace the competition that the proposed Acquisition would eliminate. In addition, because of research, development and regulatory barriers, entry sufficient to deter or counteract the competitive effects of the proposed transaction is unlikely to occur within two years.

The proposed transaction is also likely to result in anticompetitive harm in the market for cattle gonadotropins. These products are used to treat follicular cysts in cattle and to synchronize the reproductive cycles of cattle undergoing artificial insemination. Although there are other reproductive products on the market, these other products are used in combination with, and not as substitutes for, cattle gonadotropins in order to achieve reproductive synchronization. The combination of Merial and Schering-Plough would result in a duopoly in the market for cattle gonadotropins leaving only Wyeth to compete with the combined firm.

Thus, the proposed merger would eliminate a significant competitor in the U.S. market for cattle gonadotropins, and absent a remedy, customers would likely pay higher prices for these drugs. . . .

At the time the parties entered into an agreement to divest Merck’s shares in Merial to Sanofi-Aventis, they also entered into a call option agreement (“Call Option”) granting Sanofi-Aventis the right to combine the animal health businesses of Merial and Schering-Plough after the Acquisition is consummated and to recreate the 50/50 joint venture between Merck and Sanofi-Aventis. The effect of the Call Option, if exercised, would be to reverse the animal health remedy required by the Order. Consistent with Commission policy, the Order contains a prior approval provision to address the credible risk (here, the high likelihood) that the combined Merck/Schering-Plough and Sanofi-Aventis would combine their animal health businesses after the divestiture. The call option was entered into with the expectation that it is likely to be exercised, and the firms have publicly identified the advantages of such a combination. As a result, Merck is prohibited from acquiring any of Merial’s animal health assets, or in any way combining the animal health businesses of Merck and Sanofi-Aventis without the prior approval of the Commission. . . .

Schering-Plough To Sell Rolapitant Franchise To Opko Health; Draws FTC Clearance

Well — the US FTC just cleared the bust-up to proceed, per Reuters:

. . . .Schering-Plough agreed to sell its rolapitant drug, a treatment for nausea and vomiting in chemotherapy patients, as part of a proposed consent order with the government. The rolapitant drug, which was in the process of being licensed, will be sold to Opko Health. . . .

Merck has agreed to sell its interest in Merial Ltd, an animal health business, to its French partner in the joint venture, Sanofi-Aventis (SASY.PA), in response to regulators’ concerns, the FTC said. . . .

I’ll post the consent decree shortly.

Time Warner Shareholders Better Hope Hassan Isn’t Named The Compensation Committee Chair!

Let’s hope he’s not named to decide executive compensation at Time-Warner. Per Reuters:

. . . .Time Warner said on Thursday that Schering Plough Chief Executive Fred Hassan has been elected to its board.

Hassan, 63, is the latest addition since former U.S. Attorney General William Barr, 59, was elected in July.

Vacancies were created after former Chairman and CEO Richard Parsons and former director and Colgate-Palmolive Chairman Reuben Mark retired from the Time Warner board in May and former director Herbert Allison resigned to accept a senior position in the U.S. Treasury Department in June. . . .

Introducing. . . “Harry Reid and the Blenders”! — Flawless Satire, NYT-Style

Despite the whimsical title, David Herszenhorn, for The New York Times “Prescriptions” blog offers us the “what’s next?” — while the ink is still drying on Speaker Pelosi’s press releases, this morning, thus:

. . . .Mr. Reid will gather the group in his office on the second floor of the Capitol on Wednesday for its first official meeting. The group includes Senator Max Baucus, Democrat of Montana and the Finance Committee chairman; Senator Christopher J. Dodd, Democrat of Connecticut, who was acting chairman of the HELP committee when it passed its health care bill; and representatives of the White House.

Jim Manley, a spokesman for Mr. Reid, said that Senator Olympia J. Snowe of Maine, the lone Republican on the Finance Committee to vote in favor of the bill, would be invited to future sessions. And Mr. Manley said the Democratic leader was prepared to go to substantial lengths to keep Ms. Snowe’s support.

“He is prepared to do what he can to keep her on board while putting together a bill that can get the 60 votes necessary to overcome a Republican filibuster,” Mr. Manley said. . . .

[Ed. Note: Obviously, I mean no disrespect to Mr. Hanks' fine project, of a few years back -- it is a most-sincere homage (click to enlarge), at right -- with Senator Reid's actual law school class photo added as the Bass Player!]

The primary reason I mention this all — is that all of big pharma is off this afternoon, on a generally bullish day on the NYSE (GDP showed good growth this morning, signaling that a recovery is underway) — and that is likely due in large part to the fact that, if either version of these bills ultimately become law, United States drug prices will not rise as they have, in the past.

Even if the “public option” is a negotiated price option, rather than a “Medicare plus 5” plan, there will be much more pressure on the drug-cost component of overall health care spending in the United States.

And that will be a very good “Thing You Do“, in my humble estimation (okay — I know I reached a little too much, on that one. . . sorry):